The New York Times Tackles Online Allowance

Ron Lieber weighs the pros and cons of online allowance management in today’s New York Times piece: Managing a Child’s Allowance, the Online Version. The article focuses on a competitor, but FamZoo receives some nice mentions at both the beginning (with a link to our About page) and the end (with a link to a post about our Partner Edition for credit unions, banks, and other financial organizations).

Here are a few thoughts on the points Ron raises in the article.

First, Ron worries that online sites like ours make money less tangible for kids. I understand that sentiment, but one of our key goals is to educate kids that electronic forms of money are in fact very real — just like physical forms. The sooner kids get that — and they catch on fast — the better. Ideally, they’ll achieve this epiphany before they get a hold of credit cards or purchase boatloads of virtual goods within some nefarious online game.

Second, Ron laments encouraging yet more screen time for kids. I hear that, but realistically any screen time spent on FamZoo periodically checking a balance or progress on a savings goal is negligible compared to the time they’re likely spending on Facebook, Battlefield 3, Halo, World of Warcraft, Minecraft, you name it.

Third, Ron worries that the email based purchase approval process in Tykoon might replace real conversations. That’s one reason we didn’t implement such an approval process in FamZoo. Spurring meaningful conversations between parent and child about life skills is a key objective. The other — and frankly bigger — reason we didn’t implement an email workflow process for transactions is that it’s just plain cumbersome. We constantly remind ourselves while designing FamZoo that parents are insanely busy. We want to make it super simple and painless for parents to be consistent, effective money mentors.

Fourth, Ron notes that it can be annoying when the child’s desired purchase or charitable giving target is not in the canned Tykoon store. This gets into a bigger issue of business models and conflicting priorities: if a site’s mission is to help kids learn good spending habits, but the site makes money by getting a cut of every purchase made from the site, a conflict naturally arises between the mission (delayed gratification) and the revenue (which is proportional to purchase volume). That’s why our business model is a flat, transparent subscription fee. When your child learns and exercises spending restraint, FamZoo’s revenue doesn’t tank.

Lastly, the article includes some discussion about why a more game-like approach isn’t taken. While I’m a fan of infusing game-like incentives into task based systems, I think anyone who thinks they’re going to make a youth financial education game that rivals today’s popular games (like World of Warcraft or even Angry Birds) is going to find that’s a very, very tall order — if not impossible. I think gamification can be applied to personal finance in clever ways, but personal finance just doesn’t really cut it as a game in and of itself. Why? Check out this video